C.V. Kumaraswami Sastri, Kt., Officiating C.J.
1. This is an appeal against the judgment of Devadoss, J., in S.A. No. 100 of 1923. The 2nd defendant applied to the District Court of Kistna to be adjudicated an insolvent on the 24th of January, 1918. On the 31st of January, 1918 the District Court transferred the petition to the Official Receiver, the 1st defendant. The adjudication order was made on the 15th of July, 1918 and the Official Receiver put the property in dispute to sale at an auction held on the 25th of August 1918, and executed a sale deed on the 12th of September, 1919. Defendants 3 to 5 are the purchasers under the sale deed. The plaintiff who is the son of the 2nd defendant sued for a declaration that the sale by the Official Receiver is invalid, and for a partition and delivery to him of his share. He alleged that the debts contracted by his father were for illegal and immoral purposes not binding on him and that even if the sale is valid his interest would not be affected. On the adjudication of the 2nd defendant no order vesting the properties in the Official Receiver was made as required by Section 16 of the Provincial Insolvency Act (III of 1907). The properties therefore vested in the Court in the absence of an express order vesting them in the Official Receiver. It is clear that before the order of adjudication which was passed on the 15th of July, 1918 neither the Court nor the Official Receiver could have sold the properties, and that immediately, after the adjudication was made the properties of the insolvent vested in the District Court. After the suit was filed the Official Receiver applied to the Court for a vesting order and an order was made on the 1st of February, 1921. The question which we have to decide is whether the order made long after the sale deed executed by the Official Receiver, who at the time of the execution of sale deed had no power to sell owing to the absence of a vesting order, validates the sale. The Act in force at the date of the filing of the application by the insolvent was Act III of 1907. Section 16, Clause (2) of that Act provided that on the making of an order of adjudication the whole of the property of the insolvent with the exception of the items mentioned in the section shall vest in the Court or in a Receiver as provided therein and shall become divisible among the creditors. This section is re-,enacted as Section 28 of Act V of 1920 and the relevant clauses are 2 and 3. This is therefore not a case where the properties continued to remain in the insolvent but a case where after the adjudication order they vested in the Court and at the date of the sale they must be vested either in the District Court or in the Official Receiver if the vesting order was passed. It is not therefore that neither the Court nor the Receiver had the power to sell. One of them under the Act had the power to sell.
2. The sale by the Official Receiver is sought to be validated on two grounds, namely, that the Official Receiver being only an officer of the Court and the properties having vested in the Court, the sale by the Official Receiver must be treated as a sale by an authorised agent of the Court subject to ratification and that the vesting order passed subsequent to the sale had the effect of ratifying and validating the sale held by the Official Receiver. It is also contended that Section 43 of the Transfer of Property Act would apply to a case like the present and that even assuming that the Official Receiver sold without title the vesting order gave him a subsequent title which the purchasers could avail themselves of.
3. As regards the first contention, 1 do not think that the Official Receiver to whom the matter is transferred for disposal by the District Judge under the provisions of the Provincial Insolvency Act can be said to be an agent of the Court in respect of any acts done by him. The Official Receiver is an officer appointed by the Local Government under Section 19 of the Provincial Insolvency Act (III of 1907) and where a matter is transferred to him under the powers conferred by the Act he is an officer who acts not as an agent 6f the District Court but as a person who under the Act is invested with powers specified therein any more than a Court to which a decree is transferred for execution under the provisions of the Civil Procedure Code can be said to be the agent of the Court transferring the decree. There may be cases where there is something in the order of Court transferring the matter to the Official Receiver which limits his powers or which can be said to constitute him an agent but in the present case no such limitation exists. I do not think that the Official Receiver or the Official Assignee is an agent of the Court within the meaning of the Indian Contract Act so as to enable the Court to ratify any unauthorised acts done by the agent.
4. The next question is whether Section 43 of the Transfer of Property Act would apply. In order to attract the provisions of Section 43 the sale should not fall within Section 2, Clause (d) of the Transfer of Property Act. Section 2, Clause (d) enacts that nothing contained in the Act shall be deemed to affect any transfer by operation of law or by, or in execution of, a decree or order of a Court of competent jurisdiction, except so far as is provided by Section 57 and Chapter IV of the Act. I do not think that a sale by the Official Receiver acting under the provisions of the Provincial Insolvency Act is a transfer of property by operation of law or by, or in execution of, a decree or order of a Court of competent jurisdiction. The order of Court under the Provincial Insolvency Act simply vests the property in the Official Receiver and on such vesting he is under the provisions of the Act entitled to deal with the property in the various modes specified in Section 20 of Act III of 1907, which corresponds to Section 59 of Act V of 1920. I may point out that both Ss.20 and 59 do not require any leave or order of the Court so far as the sale of property is concerned. It is only as regards els. (c) to (i) that any leave is necessary. No authority has been cited for the proposition that a sale by the Official Receiver is a sale in execution of a decree or order of the Court and attracts the advantages and the infirmities attending Court sales. Reference has been made to Gaya Prasad v. Baij Nath I.L.R. (1892) A 176 as authority for holding that the sale by the Official Receiver is a sale under an order of Court and Section 2, Clause (d) of the Transfer of Property Act applies. There the question arose under the Companies Act and the sale was by the Official Liquidator appointed under the Act who sold under orders of Court. The question whether such a sale would be a Court sale was left undecided. The learned Judges point out that without the order sanctioning the sale the defendant would have got no title from the Official Liquidator. In the present case there is no order of Court sanctioning the sale by the Official Receiver to the first respondent nor was any order necessary as the Act gave the Receiver full powers of sale. It-seems to me that a sale by an Official Receiver acting under the powers conferred by the Act and without any leave or sanction of Court being necessary stands in the same position as a sale by a person in whom property vests by law for the purpose of administration of an estate subject of course to such protection as the law allows to judicial officers acting in execution of their office. Though property vests in the Receiver by operation of law the transfer by him is a transfer by one party to another and cannot be said to be a transfer by operation of law in favour of his vendee. Viewing the same in this light, I am of opinion that the present case falls within Section 43 of the Transfer of Property Act. There is always an implied covenant by the vendor that he has title to sell. Section 55 contains implied covenants in sales of immoveable property and there can be little doubt that when a person sells property there is an implied covenant that he has power to sell. Even assuming that all that the Official Receiver can sell is the right, title and interest of the insolvent, still the Official Receiver covenants that he has authority to transfer such right, title and interest as the insolvent has. It is of course open to him by apt covenants to protect himself against any of the infirmities of title or any disputes which may arise as regards the sale. But in the present case it is not contended that the Official Receiver has done so. In the present case the Official Receiver who had no power to sell has sold the property. There is as regards the vendee who had no notice that no vesting order was passed and who was entitled to assume that the Official Receiver was clothed with the requisite authority, the implied covenant that he has title to sell and there is therefore an erroneous representation that he is authorised to transfer immoveable property, when as a matter of fact he had no such power. The transferees in this case paid consideration for and if the Official Receiver subsequently got authority to transfer the property there is no reason why such subsequent authority should not operate so as to validate the antecedent sale. The case comes strictly within the wording of Section 43. I may point out m this connection that in cases where after a sale it is sought to rectify any defects in the power of the Official Receiver it is desirable that notice should go to all the parties interested in the property and their objections should be heard as there mav arise cases where it is undesirable that the Court should exercise its discretion when it is passing orders the effect of which would be to validate invalid transactions long afterwards and affect the right of third persons. In the present case there is no hardship shown.
5. As regards the plea that the debts were contracted by the father for illegal and immoral purposes no evidence has been adduced and the appellants' vakil does not want a remand for the determination of that question.
6. I had some doubt whether having regard to the decision of their Lordships of the Privy Council in Sat Narain v. Behari Lal 47 M L J 857 (P C) the Official Receiver could sell the interest of the minor which did not vest in him under the guise of exercising the power which the father has. In the case of a father who is a member of a joint family with his sons the whole joint property vests in them jointly. This is not the case where the father becomes an insolvent and his interest only vests in the Official Receiver. But in view of the decision of the Full Bench in Balavenkata Seetharama Chettiar v. Official Receiver, Tanjore (1926) 51 M L J 369 (F B) I think the matter is concluded by authority.
7. The Letters Patent Appeal fails and is dismissed with costs.
8. L.P.A. No. 125 of 1924 : To understand the points raised in this appeal facts may be briefly stated as follows. One Muttayya applied in 1918 to be declared an insolvent to the District Court of Kistna. The District Judge passed the order ' transferred to the Official Receiver for disposal ' and did nothing else. The Official Receiver adjudicated Muttayya an insolvent and instead of remitting the case to the District Judge for orders appointing him Receiver of the properties and vesting them in him, very carelessly proceeded to sell the joint family property of Muttayya and his son, and the contesting respondents purchased it. Plaintiff has now brought the suit to have it declared that his half share in the property did not pass by the sale and to recover possession of it. While this suit was pending before the District Munsif the Official Receiver realising his mistake applied in 1921 to the District judge for a vesting order having retrospective effect from the date of adjudication and he passed an order as follows:
The Official Receiver of Kistna is appointed Receiver for the properties of the insolvent with effect from the date of adjudication.
9. This order was passed without notice to any one three years after the adjudication.
10. We have to consider the effect of this belated proceeding on the Official Receiver's sale for it is contended that that order has validated the sale which admittedly was an invalid one at its date as the Official Receiver had no power to sell without a vesting order. A number of authorities have laid down in this Court that a sale without a vesting order is invalid and the point must now be taken to be settled. The learned vakil for the respondent therefore wisely conceded the point. There is no provision in the Insolvency Act to enable a Court to pass orders with retrospective effect and so far as the Judge's order purports to take effect retrospectively it is clearly bad. But the respondents contend that giving it effect as from its date it has validated the sale from that date. The argument is put in two ways. It was first.argued that the Official Receiver in selling the property must be treated as having acted as an agent of the judge and his want of authority was subsequently cured by the Judge's order which amounted to a ratification by the principal of the agent's unauthorised act. It was next argued that Section 43 of the Transfer of Property Act applied and as soon as the Official Receiver got authority to sell, the purchasers could take advantage of it and treat the sale to them as valid.
11. Taking the question of ratification first I am of opinion that the contention cannot be supported. Though it may be, as pointed out in Subba Aiyar v. Ramaswami Aiyangar 40 M L J 209, the Court could appoint an agent to sell, there is nothing on record in the present case to suggest that the Court did appoint the Official Receiver as such agent; in fact he could not have done so. [See Kavali Sankara Rao v. Ramakrishnayya (1923) 46 M L J 184] Nor is there anything to show that the Official Receiver purported to act as the agent of the Judge. He purported to sell on his own authority under the powers given him by the Act. The fact that he misconceived his powers does nut make him an agent. The theory of agency should not be introduced, in my opinion, unless there is some foundation for it on facts. The Official Receiver not being an agent and not having purported to act as an agent, there can be no valid ratification. It is clear law that unless the agent purports to act as such his action cannot be ratified by the principal. In this case there is the further difficulty that nothing appears in the Judge's vesting order implying any ratification of the sale or even to indicate that he knew of the sale. The plea of ratification must therefore be rejected.
12. Turning now to the argument based on Section 43 it seems to me with all respect that the section is not applicable to the present case. Taking the language of the section it has first to be made out that the Official Receiver made an erroneous representation that he was entitled to sell the suit property.
13. The Official Receiver's sale is in my view in the nature of a Court-sale and so far as I can see there is no implied representation involved in it. In such sales there is no covenant for title. What the Official Receiver sells is merely the title of the insolvent if any and the purchaser takes what he can get. If the purchaser fails to get a title he does not thereby get any claim for damages against the Official Receiver as he would against a private seller. Compulsory sales in invitum by Courts or by its officers stand on a very different footing from private sales.
14. Again it was argued that the Transfer of Property Act was itself excluded from applying to such sales by reason of Section 2, Clause (d) of that Act. The words of the section applicable are 'transfer by order of a Court of competent jurisdiction' leaving out the other words. I am inclined to think that the Official Receiver's sales come within these words. They are in the nature of Court-sales and their validity really depends on the order of the Insolvency Court vesting the property in the Official Receiver and thus authorising him to sell. The sale is a compulsory sale in invitum and the foundation of its validity is the order of Court. It is open to the Court to set aside a sale by Official Receiver. The Official Receiver is an officer of Court and acts as such in effecting sales and not as a private individual. The Act as its preamble shows really deals only with transfer of property by act of parties. A similar point was raised before the Allahabad High Court with reference to a sale by the Official Liquidator and their Lord-ships were inclined to apply Clause (d) to such a sale though they did not expressly decide it. No other authority has been cited to us on the point.
15. For the above reasons with all respect I would hold that Section 43 cannot be applied to this case. It may be mentioned in conclusion that though the plaintiff raised the plea that his father's debts were illegal and immoral he adduced no evidence in support of it.
16. Having come to the conclusion that the Official Receiver's sale was invalid and it has not been validated in any way I hold that the plaintiffs suit should have been decreed. I would therefore allow the Letters Patent Appeal and dismiss the Second Appeal to the High Court with costs in both.
L.P.A. No. 126 of 1924 follows.
17. This is a Letters Patent Appeal from the order of Devadoss, J., in S.A. No. 100 of 1923. The 2nd defendant applied to be adjudicated an insolvent on the 24th of January, 1918. The petition was referred for disposal on 31st January, 1918 to the Official Receiver of Masulipatani who is the 1st defendant. The 2nd defendant was adjudicated an insolvent on the 15th of July, 1918. The Official Receiver held an auction sale of the property on 25th August, 1918. Defendants 3 to 15 are the purchasers by separate sale deeds. The plaintiff is the son of the 2nd defendant. He sued for a declaration that the sale by the 1st defendant of the plaintiff's share of the property to defendants 3 to 5 is invalid and for partition and recovery of his share. When the 2nd defendant was adjudicated an insolvent, no vesting order in a Receiver was made under Section 16 of the Act of 1907 under which the proceedings were taken. The result was that the whole property of the insolvent vested in the Court under Section 16, Clause 2(a). It has been held in a series of decisions in this Court that an express vesting.order must be made so as to vest the property in the Official Receiver and if no such order was made the property vests only in the Court. See Official Receiver of Trichinopoly v. Somasundaram Chettiar : (1916)30MLJ415 , Rama Aiyar v. Official Receiver of Tinnevelly : (1917)32MLJ520 , Vythilinga Paddyachi v. Ponnuswanii Padayachi (1920) 41 M L J 75, Kavali Sankara Rao v. Ramakrishnayya (1923) 46 M L J 184, Sankaranarayana Pillai v. Rajamani (1923) 46 MLJ 314, Mulhuswami Swa-miar y. Somoo Kandiar (10) and Subba Aiyar v. Ramaswami Aiyanyar I.L.R.(1920)M 547 . In the decision in Muthuswami Swamiar v. Somoo Kandiar I.L.R. (1920) M 869 Seshagiri Aiyar, J. seems to have come to the conclusion with great hesitation and gave no reasons in support of the conclusion, being merely content not to dissent from the other Judge. In that case, the adjudication was made by the Official Receiver. In Subba Aiyar v. Ramaswami Aiyanyar I.L.R. (1920) M 547 also the petition was for adjudication and for the administration of the estate. The Receiver made the adjudication but no order was made by the District judge vesting the property in the Receiver. The learned Judges, however, held that the words 'for the administration of the estate' amounted to appointing the Official Receiver an agent of the Court. Whether that case was correctly decided or not, in the present case the petition was merely referred to the Official Receiver for disposal, that is for adjudication or not as the case may be. It cannot be held that the disposal of an application for adjudication involves the administration of the estate by the Receiver, especially when the Receiver cannot deal with the estate until a vesting order has been made. The decision in Subba Aiyar v. Ramaswami Aiyangar I.L.R. (1920) M 547 : 40 M.L.J. 209 was distinguished in Kavail Sankara Rao v. Ramakrishnayya (1933) 46 M L J 184 in which the order was exactly the same as in the present case and it was held that the transfer of the petition for disposal cannot be construed as in Subba Aiyar v. Ramasivami Aiyangar I.L.R. (1920) M 547 . In the case in Sankaranarayana Pillai v. Rajamani (1933) 46 M L J 314 the Court itself made the order of adjudication and then passed the order 'referred for further proceedings' and the learned Judges construed this to mean that the Official Receiver of the District should act as Receiver in the particular case and the matter was referred to him and therefore the order amounts to an order of appointment. Venkatasubba Rao, J., was also of the opinion that the Official Receiver may be regarded as having been constituted as agent of the Court as in Subba Aiyar v. Ramaswami Aiyangar I.L.R. (1920) M 547 .
18. It seems to me that the reasoning in Sankaranarayana Pillai v. Rajamani (1933) 46 M L J 314 does not help us in the present case as the order of reference to the Official Receiver was not made after the adjudication but the reference itself was for the purpose of adjudication. We cannot imply by the mere use of the word 'disposal' that it was intended to appoint the Official Receiver as the agent of the Court. Nor did the Official Receiver purport to act as the agent of the Court. The result is that the line of reasoning based upon the agency of the Receiver does not avail in this case. Mr. Varadachari for the respondent contended that the Court itself canrectify the defect in the original order by the later order it passed on 1st February, 1921 long after the sales and after the trial of this suit and eight days before judgment of the District Munsif. He relies on Kala Mea v. Harperink I.L.R. (1908) C 323 : 19 M L J 115 (P C). I cannot think that case while showing that a Court may correct its own irregularities in some cases supports the proposition that an order made on 1st February, 1921 can date back and validate sales made in 1918. For this purpose the only argument that can be urged is by relying on Section 43 of the Transfer of Property Act. In my opinion it may be said in this case that the Official Receiver erroneously represented to the purchasers that he was authorised to transfer the properties in the suit. There is no doubt that he also professed to transfer the properties for consideration. I also think that sales by Official Receiver will be covered by Section 43 and will not fall under the exemption clause, Section 2(4) which relates to transfers by operation of law, and transfers by a decree or order and transfers in execution of a decree or order. The only obstacle that remains in the way of the respondent is whether the words 'any interest which the transferor may acquire in such property' in Section 43 will Cover the right of a Hindu father to sell the whole joint family property which vests in the Official Assignee according to our judgment in Balavenkata Sefetharama Chetti v. Official Receiver, Tanjore : AIR1926Mad994 . I think the words 'any interest in such property' are wide enough to cover the right of a Hindu father to sell the whole of the joint family property and are, if at all, wider than the word 'property' inS.2(d)of the Provincial Insolvency Act which, according to our construction, will include such power. On this last ground I am therefore inclined to hold, agreeing with Devadoss, J., that the appeal must be dismissed with costs.
Venkatasubba Rao, J.
19. It has been held by a Full Bench of this Court in Balavenkata Seetharama Chetti v. Official Receiver, Tanjore : AIR1926Mad994 that the conditional power of a Hindu father to dispose of his sons' interest vests in the Official Receiver, and that decision governs the present case so far as this point is concerned.
20. A further contention has in this appeal been raised that the sales by the Official Receiver are bad by reason of the fact that when he effects the sales there was no order in virtue of which the property vested in him. The following dates arc material. The 2nd defendant applied to be adjudicated insolvent on the 24th January, 1918. His petition was forwarded for disposal to the Official Receiver on 31st January, 1918. The Receiver adjudicated him insolvent on 15th July, 1918. The properties were sold by auction on 25th August, 1918 and sale deeds were executed by the Receiver in favour of defendants 3 to 5 on 12th September, 1919.The vesting order was made by the Court on 1st February, 1921.
21. This case has to be decided with reference to the Provincial Insolvency Act (III of 1907). Under Section 18(1) the Court may at the time of the adjudication or at any time thereafter appoint a Receiver for the insolvent's property and thereupon such property vests in the Receiver. There being no order appointing a Receiver, the question of vesting in a Receiver cannot arise. When the order of the 31st January, 1918 was made the insolvent had not been adjudicated and the Court could not therefore then appoint a Receiver for the property of the insolvent. The order of the 31st January cannot accordingly be Construed as appointing the Official Receiver by implication Receiver of the insolvent's property. Then, can it be said, as has been contended by Mr. Varada-chari, that the Official Receiver was the agent of the Court for the sale of the property? I do not think that on the faces of the present case, the theory of agency can be upheld. Under Section 16(2)(a), on the making of an order of adjudication, if the insolvent's property docs not vest in the Receiver it vests in the Court. On 31st January, 1918 when the petition was forwarded to the Official Receiver an order of adjudication had not been made and the property therefore did not vest in the Court, and it is thus difficult to accept the argument that the Official Receiver was intended to be constituted the Court's agent for the sale of the property. Moreover, the words of the order 'forwarded to the Official Receiver for disposal' clearly show that the functions which the Official Receiver was to exercise were delegated judicial functions under Section 52 and have no reference to the administration under Section 20 of the insolvent estate. For these reasons, Sankaranarayaua Pillai v. Rajamani (1923) 46 M.L.J 314 and Subba Aiyar v. Ramaswami Alyangar I.L.R. (1920) M 547 : 40 M L J 209 do not apply to the facts of the present case. It was next suggested that the Court by making the vesting order, dated 1st February, 1921 should be deemed to have ratified the unauthorised sales. The question of ratification does not arise as the Official Receiver did not purport to act on behalf of the Court. The contention of Mr. Varada-chari based on the ground of agency thus fails.
22. It is next contended, that although the transfer was inoperative at the outset, it afterwards became operative under Section 43 of the Transfer of Property Act.
It runs thus:
Where a person erroneously represents that he is authorised to transfer certain immoveable property and professes to transfer such property for consideration, such transfer shall, at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract of transfer subsists.
Nothing in this section shall impair the right of transferees in good faith for consideration without notice of the existence of the said option.
23. When the Official Receiver sold the properties in 1919 he had no interest in them and was therefore not competent to convey them; but in virtue of the vesting order, dated 1st February, 1921, he acquired an interest and the transfer operates under Section 43 on that interest without any further act on the transferor's part. This is the contention and in my opinion it seems to be sound and must be accepted. The section embodies a rule of equity that when a transferor purports to convey a property to which he has no title, the transferee must be satisfied out of any title which the transferor may afterwards acquire in the same property. All the requirements of the section are here fulfilled. There was an erroneous representation by the Official Receiver that he was authorised to transfer the property. There was no order appointing him a Receiver and the property had not vested in him. Believing he had the right to deal with it he conveyed the property. The representation was, of course, not express, but express representation is not necessary under the law. Representation of ownership was implied in the very act of transferring the property and such an implied representation is sufficient for the purposes of the section. Angannayya v. Daroor Naramnna (1907) 18 ML J 247 and Shephard and Browne's Transfer of Property Act Commentaries to Section 43. It was next contended that Section 43 does not apply, because the preamble to the Transfer of Property Act states that the object of enacting it was to define and amend the law relating to the transfer of property by act of parties and it is suggested that the act of the Official Receiver does not fall within the description of 'act of parties'. I find this to be a fallacious argument. The expression by act of parties ' connotes that the scope of the Act is limited to voluntary transfers as distinguished from transfers by operation of law. When the property vests in a Receiver on insolvency there is a transfer by operation of law but when a Receiver transfers the property to an alienee, the alienation is a voluntary transfer and is as much an ' act of parties ' as any transfer by a private individual. Section 2(d) of the Transfer of Property Act is next relied on as furnishing an argument against the application of Section 43. The material portion of Section 2(d) reads thus:
But nothing herein contained shall be deemed to affect any transfer by operation of law or by, or in execution of, a decree ar order of a Court of competent jurisdiction.
24. This provision makes it clear that transfers by operation of law do not come within the scope of the Act, but, as I have said, the sales in question are not such transfers.
25. It is next obvious that these sales arc not transfers in execution of a decree or order of a Court of competent jurisdiction. Then remains the only other part of the section. Are these sales transfers by a decree or order of a Court? It is impossible to regard these as such. There is, in the present case, no decree or order which may be said to have the effect of transferring these properties. Section 2(d), does not stand in the way. Next, it is said that the section does not apply to sales forbidden by law on the ground of public policy. This is not such a sale and this argument is equally untenable. It is lastly contended that Section 43 does not prevent the insolvent's sons from attacking the sale. I am unable to follow this argument. The section refers to transfer of immoveablc property. What the Receiver transferred was undoubtedly immoveable property. In so transferring irnmoveable property he exercised the Hindu father's power to dispose of his sons' shares. The question is, what is that that he transferred? Whether in his capacity as the assignee of the insolvent or as exercising the insolvent's power of disposal, what the Receiver actually did was to transfer immoveable property. That is all that the section requires and 1 do not see how if the Receiver is bound by the transfer, the sons are not. I may take an illustration for showing how misleading the argument of the learned vakil for the insolvent's son is. Let us take a simple case of the father himself transferring the property. Let us assume that the father acquires a property by purchase as joint family property. Soon after its acquisition the father sells it for justifiable purposes. It is subsequently found that on the date of the transfer by the father, his title was defective as he had not taken, say, a release from some party with an outstanding title. When the defect is discovered it is cured by the father taking the necessary release deed. Can it be said that the sons in this case can take advantage of their father's defect of title and contend that the property has not passed to the transferee? Similar instances may be given of cases of ward and guardian or beneficiary and trustee. In these Gases it is impossible to uphold the contention that while the law forbids the actual transferor to rely upon his own defect of title, a third party for whom the transferor acts can however defeat this equitable rule and commit a fraud. I am clearly of the opinion that Section 43 applies and I therefore accept the contention based on that section.
26. Another point has been urged by Mr. Varadachanar, namely, that the Court is bound to set right its own mistake and for this he relies upon the very strong observations of Lord Macnaghten in Kala Mea v. Harperink I.L.R. (1908) C 323 . I am not prepared to say that this contention is unsound, but I refrain from expressing any opinion at present on that point.
27. The appeal fails and is dismissed with costs.
L.P.A. No. 126 of 1924 follows.
28. I agree that the order of 31st January, 1918 was not a vesting order, if only for the reason that under Section 56 of the Provincial Insolvency Act the Court cannot pass such an order before the order of adjudication is passed.
29. Three separate lines of argument have been employed to support the position that the Court can validate its Official Receiver's sale by passing a subsequent vesting order. The first is that if the property does not vest in the Receiver it vests in the Court, and, the Receiver being an officer of the Court, we may regard Court and Receiver as one, and an act done by either as done by that single agency. The second argument would make the Receiver the Court's agent, thus enabling the Court to ratify an act under Section 196 of the Indian Contract Act. The third argument is based on Section 43 of the Transfer of Property Act.
30. I do not think it necessary to discuss the merits of the first and second arguments, because it appears to me clear that the case may be brought under Section 43 of the Transfer of Property Act. That section is a branch of the Law of Estoppel, and the first requisite is that the transferee should have been misled into the impression that his transferor had title to transfer. It appears to me that where an Official Receiver sells the property of an insolvent, it may be presumed without more that a purchaser erroneously believed him to have authority to do so, and it is not necessary in order that such purchaser may be protected under Section 43 that he should have instituted any further inquiries. The section itself contains nothing which would make it inapplicable to a sale by a public servant, but reliance has been placed on the terms of Section 2(d) and, should any ambiguity be found therein, of the preamble. Section 2(d) provides that nothing contained in the Act shall be deemed to affect ' any transfer by operation of law or by, or in execution of, a decree or order of a Court of competent jurisdiction....' No difficulty seems to be presented by the words 'transfer by operation of law ' which, however widely they may be construed, cannot cover a sale by a Receiver of an insolvent's property. Such a sale is frequently a matter of discretion and so a voluntary act on the part of the Receiver, as the purchase is on the part of the buyer, and, although the Receiver may be a public officer, the transaction is not the less an act of parties on that account. The ordinary rules relating to stamps and registration apply to such sales.
31. The next phrase to be considered is ' by a decree or order of a Court of competent jurisdiction '. It would, 1 think, be a misuse of language to say that a sale was by order of the Court for the mere reason that the Court had passed a vesting order in respect of the whole assets. An Official Receiver is not required to obtain the Court's sanction before selling any portion of the property, nor is such sale subject to the Court's confirmation. There is an Allahabad case Gaya Prosad v. Baij Nath I.L.R. (1892) A 176 in which the question was raised but not decided, whether a sale by the Official Liquidator, in the process of winding up a company, fell within Section 2(d) of the Transfer of Property Act, but since the learned Judges observe that without the order sanctioning the sale the defendant would have got no title from the Official Liquidator, Linfer that there was a specific order of Court sanctioning that particular sale. If that was so, the argument for excluding such a sale from the provisions of the Act would be stronger than where only a general vesting order has been passed. Nevertheless, enough doubt was felt for the Bench to add the advice that Official Liquidators who take leases and subsequently as such liquidators sell the interest of the lessee had better, for their own protection and to avoid any question of their continuing liability, execute in favour of the purchasers written assignments of the leases and see that they are registered. In other words, they should observe the formalities required for a transfer by act of parties.
32. There remains to be considered the effect of the words ' in execution of a decree or order of a Court of competent jurisdiction, ' and it would, I think, be unduly extending the meaning of these words to hold that a sale of property vested in the Official Receiver by order of the Court is in execution of that order. In one sense, no doubt, the sale is in pursuance of or ' in execution of ' the order, since such an order has ordinarily in contemplation a realisation of assets by sale. But attaching to ' execution ' the meaning which it bears in relation to judicial proceedings, I conclude that such a sale falls outside the scope of the exception. I agree therefore that the appeals must be dismissed with costs.